When the coupon rate on newly issued bonds ________ relative to older,outstanding bonds,the market price of the older bond ________.

Question

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When the coupon rate on newly issued bonds decreases relative to older, outstanding bonds, the market price of the older bond falls in the secondary market. This is because the older bond now offers a higher coupon rate than the new bond, making it more attractive to investors. As a result, existing bonds become more valuable, and their market price rises, which reduces their yield to maturity. Conversely, when the coupon rate on newly issued bonds increases relative to older, outstanding bonds, the market price of the older bond falls in the secondary market.

When the Coupon Rate on Newly Issued Bonds ________ Relative